Correlation Between AXS 2X and Direxion Daily

Can any of the company-specific risk be diversified away by investing in both AXS 2X and Direxion Daily at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining AXS 2X and Direxion Daily into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AXS 2X Innovation and Direxion Daily SP500, you can compare the effects of market volatilities on AXS 2X and Direxion Daily and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in AXS 2X with a short position of Direxion Daily. Check out your portfolio center. Please also check ongoing floating volatility patterns of AXS 2X and Direxion Daily.

Diversification Opportunities for AXS 2X and Direxion Daily

-0.06

Correlation Coefficient

AXS 2X  Direxion Daily

Good diversification

The 3 months correlation between AXS and Direxion is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding AXS 2X Innovation and Direxion Daily SP500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily SP500 and AXS 2X is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on AXS 2X Innovation are associated (or correlated) with Direxion Daily. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion Daily SP500 has no effect on the direction of AXS 2X i.e., AXS 2X and Direxion Daily go up and down completely randomly.

Pair Corralation between AXS 2X and Direxion Daily

Given the investment horizon of 90 days AXS 2X Innovation is expected to generate 1.9 times more return on investment than Direxion Daily. However, AXS 2X is 1.9 times more volatile than Direxion Daily SP500. It trades about -0.05 of its potential returns per unit of risk. Direxion Daily SP500 is currently generating about -0.16 per unit of risk. If you would invest  4,868  in AXS 2X Innovation on October 3, 2024 and sell it today you would lose (373.00) from holding AXS 2X Innovation or give up 7.66% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

AXS 2X Innovation  vs.  Direxion Daily SP500

AXS 2X Innovation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AXS 2X Innovation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, AXS 2X is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Direxion Daily SP500

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily SP500 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Direxion Daily may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with AXS 2X and Direxion Daily

The main advantage of trading using opposite AXS 2X and Direxion Daily positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AXS 2X position performs unexpectedly, Direxion Daily can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Direxion Daily will offset losses from the drop in Direxion Daily's long position.

The idea behind AXS 2X Innovation and Direxion Daily SP500 pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.